Aurora Cannabis to Strategically Enter the United States with Acquisition of Reliva, LLC

Published: May 21, 2020

Aurora Cannabis Inc. and Reliva, LLC, a leader in the sale of hemp-derived CBD products in the US, have entered into an agreement pursuant to which Aurora will acquire all of the issued and outstanding membership interests of Reliva. Under the terms of the agreement, members of Reliva will receive approximately US$40 million of Aurora common shares. The transaction also includes a potential earn-out of up to a maximum of US$45 million payable in Aurora shares, cash or a combination thereof, over the next two years contingent upon Reliva achieving certain financial targets.

The structure of the earn-out is designed to align risk and reward between Aurora shareholders and Reliva management to focus on continued strong operational and financial execution. The transaction is expected to close, subject to customary closing conditions, in June 2020. It is anticipated that the transaction will be immediately accretive to Aurora on an Adjusted EBITDA basis, consistent with Aurora’s objective to drive towards Adjusted EBITDA profitability in its fiscal first quarter of 2021.

The transaction will combine Aurora’s leading Canadian recreational brands, and Canadian and European medical market position with the leading U.S. hemp-derived CBD brand in retail stores. Consistent with the announcement of Aurora’s business transformation plan in February 2020, the Company has aligned its U.S. investment strategy with the goals of the transformation plan, namely: financial discipline, operational focus, and strong execution. The transaction represents the culmination of a multi-month strategic evaluation of the U.S. hemp-derived CBD industry.

Reliva stood out among a lengthy list of potential partners for its: (1) focus on regulatory, testing and compliance protocols; (2) proven management team with extensive experience selling and marketing regulated consumer packaged goods; (3) deep relationships with critical trade partners that provide a U.S. national distribution footprint; and (4) financial discipline and track record of growth and profitability. Together with Reliva, Aurora is expected to be positioned as a meaningful player in the United States, the world’s largest cannabinoid market.

“Together, Aurora and Reliva will partner to create an international cannabinoid leader that we believe can deliver robust revenue and profitable growth,” said Michael Singer, Executive Chairman and Interim CEO of Aurora. “We have taken the time necessary to carefully assess the Company’s entry into the U.S. market and we firmly believe that the combination with Reliva will create significant long-term value as Reliva provides us options to grow in hemp-derived CBD internationally.”

Miguel Martin, CEO of Reliva commented, “We’re excited to join Aurora’s leading platform as we combine our highly complementary businesses and brands to build an even stronger company for future international success. We were fortunate enough to be able to choose our long-term partner and believe this partnership provides a significant opportunity to accelerate sales growth for Reliva in the United States and internationally.”

Key Strategic and Financial Highlights:

The transaction will create a large and diversified pure-play international cannabinoid company. Aurora believes the combination will provide the following strategic and financial benefits:

Immediately Accretive to Aurora Shareholders:Transaction is aligned with Aurora’s business transformation plan announced in February 2020 and provides immediate benefit to Aurora’s objective to achieve Adjusted EBITDA profitability in the first quarter of fiscal 2021

Reliva has generated positive EBITDA in the last 12 months ended March 2020

Transaction is expected to be Adjusted EBITDA accretive to Aurora shareholders in fiscal 2020 and fiscal 2021

Reliva is debt free

No capital expenditures or additional working capital investment is currently required

Addition of Experienced Management Team:The transaction will add a talented U.S. management team, with strong international consumer packaged goods backgrounds and a proven track record of growth, to the core Aurora team

Management has 40+ years of experience in sales and marketing of regulated consumer packaged goods led by Miguel Martin, a 25 year CPG veteran

Former President and General Manager of Logic Technology, one of the largest manufacturers of electronic cigarettes

Former Senior Vice President and General Manager of Altria Sales & Distribution

Upon closing of the transaction, Reliva’s management team will remain in place with Miguel Martin continuing on as President of Aurora USA, and joining the Executive Leadership Team of Aurora, reflecting his commitment and belief in the future success of the combined company

Reliva’s culture is deeply rooted in operating in highly regulated industries and producing and marketing products with high degree of testing and compliance

Creation of the Leading Global Cannabinoid Platform: The combined company will have a leadership position in the global medical and Canadian recreational cannabis markets along with a leading market position in hemp-derived CBD in the U.S.

CBD opportunity expected to be as large as US$24 billion at retail in 2025, according to the Brightfield Group

Reliva ranked #1 in topicals and #2 overall market share according to IRI with product availability in over 20,000 retail locations and via e-commerce

Creates opportunity to leverage Reliva’s leading U.S. brand position into international markets

Only CBD company in the three largest U.S. wholesale distributors

Contracts with leading retailers including 8 of the top 20 national convenience store chains

Aurora is a global leader in the cannabis industry serving both the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in global cannabis dedicated to helping people improve their lives. The Company’s brand portfolio includes Aurora, Aurora Drift, San Rafael ’71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler, and ROAR Sports. Providing customers with innovative, high-quality cannabis products, Aurora’s brands continue to break through as industry leaders in the medical, performance, wellness and recreational markets wherever they are launched. For more information, please visit our website at www.auroramj.com.

Aurora’s Common Shares trade on the TSX and NYSE under the symbol “ACB”, and is a constituent of the S&P/TSX Composite Index.

Reliva is a leader in delivering high quality hemp-derived CBD products to consumers. Built on a philosophy of compliance, testing, product innovation and approachable price points Reliva has grown to become one of the largest retail CBD brands in the U.S. Supported through long-term partnerships with leading national wholesalers and retailers Reliva’s products can be found in over 20,000 retail stores. Reliva’s management team, which has decades of regulated product experience, is uniquely positioned to manage this dynamic and rapidly growing category. For more information, please visit our website at www.relivacbd.com.

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